Aligned businesses key to good sale

09-Feb-2016

By Kristen Crawford

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Aligned product providers and competitors would see the most strategic value in purchasing a financial planning business and therefore should be considered as part of a business owner’s succession plan, according to Succession Plus.

Speaking at the Succession Planning Day 2016 in Sydney, jointly hosted by Succession Plus and financialobserver, Succession Plus chief executive Craig West said aligned product or service providers were likely to pay more than anyone else for an adviser’s business.

West compared business succession to the selling of real estate and instructed planners to ask the question of who would pay more for a house than it was usually worth.

“Your house holds strategic value for your next-door neighbours, while for everyone else it’s just a house,” he said.

“A neighbour is the only one that can amalgamate two blocks of land and sell a 2000-metre block to a developer.“

For financial planners considering selling their business, West said the process worked exactly the same.

“The equivalent of your next-door neighbour in business could be either your competitor or sometimes aligned products and service providers related to whatever product you sell,” he said.

“Businesses buying the same sort of products at the same sort of time, maybe because you’ve got a brand they want or if you’re hurting their business, could make someone a buyer with strategic value.”

He pointed to social media giant Facebook and the “fabulous acquisitions they’ve made”.

“Those guys pay ridiculous amounts of money for anything – Facebook bought Instagram because they were worried it would take them over,” he said.

“It hasn’t because now they own it and guess what they paid for it? $1 billion and it’s never made a profit.”

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